"Equity markets are sensing it, and this time, they're right. Global
growth should finally surprise on the high side in 2014," says Avery
Shenfeld, Chief Economist at CIBC. "A year of 4 per cent global growth
is hardly spectacular, but will be a point faster than 2013, and a
half-point above the last IMF forecast.

"Typically, upside surprises in growth bring higher bond yields. But the
causation also goes the other way: at a still-fragile point in the
cycle, easy monetary policy is a necessary condition for growth to
accelerate. Central bankers in North America, Europe and Japan, each in
their own way, are going to ask markets to give low rates a chance."

Canada: Better in 2014 but no home run

Amid a rising tide of global growth, Canada will be "waiting for a
helping hand from abroad" to push its economy forward in 2014, say
Deputy Chief Economist Benjamin Tal and Senior Economist Emanuella
Enenajor. "Business spending and exports should accelerate, but with
consumer spending, homebuilding and government outlays all set to
underwhelm, growth of 2.3 per cent in 2014 will trail the U.S. pace."

Fortunately for investors, stronger global growth is giving the Canadian
equity market more room to run. "Our top-down model points to a 12 per
cent gain in corporate earnings for 2014," says Mr. Shenfeld. "Within
the equity market, what hasn't played well in the past few years should
now outperform." That includes equities tied to global growth such as
base metals and energy stocks.

CIBC's 2014 forecast for the Canadian dollar sees it bottoming at
US$0.91 in the first quarter but strengthening to just five cents
weaker than the U.S. dollar by year end as global growth helps improve
the country's trade balance. Mr. Shenfeld says early-year weakness for
the loonie will be due in part to the latest policy statement from the
Bank of Canada which encourages speculation of a rate cut. Mr.
Shenfeld calls this a "phantom rate cut, one spoken about but never
seen," which can boost economic output through the exchange rate while
keeping household borrowing in check.

Mr. Shenfeld expects that the Bank of Canada will hold off hiking
interest rates until early 2015. "Higher-than-historical levels of
household debt imply a much slower trajectory back to 'normalcy' for
interest rates, as even small doses of higher rates will impose a
significant squeeze on spending room. Don't be surprised if after
taking rates to merely 1.75 per cent in 2015, we then see a pause at
that level to allow the central bank time to gauge the economic
response."

U.S.: Revving up for 2014

In the U.S., "2014-15 could finally see a real recovery take shape," say
Senior Economist Peter Buchanan and Economist Andrew Grantham.
Substantially lighter government belt-tightening combined with a
"housing recovery in progress and the shale revolution boosting U.S.
energy and related manufacturing," should see the economy achieve 3 per
cent growth in each of the next two years.

"Consumers will likely spend some of that newfound wealth on furnishing
new apartments and houses. Even after leveling off with higher mortgage
rates in mid-2013, housing starts, home sales and prices remain on
broadly upward trends. And so far that has come with little help from a
key demographic—young people," say Mr. Buchanan and Mr. Grantham.

Meanwhile, tame inflation should see the U.S. Federal Reserve keeping
rates near zero until 2015, the report notes.

Global Recovery: Picking up the pace

After a challenging few years, the global economy is finally showing
signs of moving out of the slow lane," note Mr. Buchanan and Mr.
Grantham. "[Changes] on the fiscal side and recent better-looking data
suggest the global economy is finally poised to move back onto firmer
terrain. Growth rates of 4 per cent in 2014 and 4.2 per cent the year
after would represent the best back-to-back increases in nearly a
decade."

The rising tide of growth should go a long way to restoring export
momentum in emerging markets, they say. China and India are already
showing improvement and "should continue to contribute
disproportionately to global growth and resource demand." CIBC is
forecasting growth of 8.0 and 5.3 per cent for China and India
respectively in 2014.

Meanwhile, in the Eurozone, "fiscal policy should be another catalyst
for faster-paced growth," say Mr. Buchanan and Mr. Grantham. "With
countries missing deficit targets no longer being forced to make up the
shortfall immediately, fiscal drag will likely be much lower." CIBC is
forecasting 1.4 per cent growth in the Eurozone growth in 2014.

CIBC's wholesale banking business provides a range of integrated credit
and capital markets products, and investment banking to clients in key
financial markets in North America and around the world. We provide
innovative capital solutions and advisory expertise across a wide range
of industries as well as top-ranked research for our corporate,
government and institutional clients.